Google will boost the cash it allocates to its venture capital arm, Google Ventures, to $300 million from $200 million. The move will enable the company to invest in more late-stage financing rounds, on par with more established corporate venture funds such as Intel Capital. Google Ventures will also continue to fund approximately 50 seed-stage deals each year, where it typically invests US $250,000 or less per deal.
Google is a savvy player and recognizes that no company, no matter how large or technologically sophisticated, can be on top of all the developments taking place in the rapidly changing technology/telecommunications landscape. In such an environment, even Google is prepared to rely on outside innovations to remain both relevant and competitive. Venture capital has, and will continue to be, a well established way for larger corporate players to gain access to both top talent and new technologies, some of which will ultimately be brought in-house.
We believe that many mobile network operators can benefit greatly from starting venture funds along the lines of Google’s, regardless of the specific size of the fund. In fact, in our experience, it is often the smaller, seed-stage deals that provide the biggest benefits to corporate investors, and not just in terms of ROI. At the very least, such investments provide a window into the latest developments and trends taking place in the telecom industry, which can provide valuable insights into what is going on in the global marketplace. On occasion, they can also lead to attractive new business opportunities that could well turn into major successes.
Given the headwinds facing wireless operators, we believe if they do not find ways to provide innovative, leading-edge services, they risk becoming – as we have pointed out on numerous occasions – little more than low value added conduits for more desirable, higher margin services sold by others. In our view, one time-tested way for operators to better position themselves would be to take a page out of Google’s playbook and establish a venture fund run by experienced venture professionals targeting seed- or early-stage investments in the telecom sector.
While some large, multinational MNOs already have in-house venture arms, we advise midsized and even smaller operators to pursue such a course, as well, since the biggest benefits are often garnered from the smallest deals. In effect, a few million dollars set aside for venture investing can generate a return far greater than most other strategic or operation investments that an operator can make. It could also help determine where on the continuum of value added services an operator finds itself.